Ms. Ibukunoluwa Odegbaike is the Managing Director of Guaranty Trust Bank, East Africa. Ms. Odegbaike has over 19 years banking experience spanning operations and sales and marketing.

Ms. Odegbaike is involved in the overall management of the bank’s day-to-day operations.

Before her appointment to her current role, Ms. Ibukunoluwa held various positions at Guaranty Trust Bank Plc, Nigeria. She joined the Bank in 1996 as an officer in Transactional Services Group of the Bank. Subsequently, she headed the Bank’s Private Banking Group in charge of portfolio management of the high net worth individuals of the Bank.

Before joining Guaranty Trust Bank (Kenya) Limited, she was the Head of Retail Banking, in charge of developing, executing and managing both the financial inclusion and retail strategy and tactical business plan of the Bank. This includes target market selection, customer and product propositions within the broad framework of the Bank’s strategy.

She holds a Bachelor of Science degree in Biology from University of Lagos, Nigeria and has attended several senior management courses including the INSEAD high performance management programme and Cranfield executive leadership programme.

KBA CEO CHAT - Industry Proposals on Reducing the Cost of Credit

Welcome everyone to the first of three exciting chats relating the drivers of the cost of credit

Chat Admin

This morning we will be discussing the banking industry proposals on reducing the cost of credit.

Chat Admin

Our host today is Mr Dhiren Rana CEO of Middle East Bank who will be joining us at 10am

Conrad Karume

Hi Nuru, Glad to join in the chat.

Chat Admin

We encourage you to participate in the discussion

Simon Lee

Morning all. looking forward to an informative discussion

John Komu

Good morning good people..

Chat Admin

As we wait for the chat to start at 10, we encourage you to upload a photo and update your profile.

Chat Admin

We would like to welcome Mr Dhiren Rana to the Chat Session

Dhiren Rana

I wish to welcome everybody on behalf of Kenya Bankers Association

Dhiren Rana

Today we will discuss the Total Cost of Credit...the annual percentage rate or APR...and the KBRR, or the Kenya Banks Reference Rate

Dhiren Rana

Moreover, we will also interact to discuss what banks in Kenya are doing to enhance access to credit and to reduce the interest rate

Dhiren Rana

I look forward to an interactive session

Zena Rashid

Welcome Mr. Rana

Dhiren Rana

if you do not know technicalities about APR and KBRR please do not worry because I am here to clarify and demystify these terms

Dhiren Rana

Welcome Zena...great to have you here

Chat Admin

Thank you Mr Rana for those words of introduction. We now welcome questions from those logged in.

Dhiren Rana

Let me share some thoughts as your observations come up

Dhiren Rana

It is encouraging to note that credit to small and medium sized enterprises has grown by 40 percent in the last one year...

Dhiren Rana

...banks in kenya principally focus on serving SMEs and individuals and families for their financial planning needs.

Dhiren Rana

This is really to encourage all the participants in todays discussion to seek access to banking facilities in kenya without hesitation...it is for this reason that we host the CEO Chat...so as to have an interactive engagement and give you an opportunity to share your thoughts on how you think the banking industry will continue serving you

Mbatia James

I salute you all

Dhiren Rana

The growth of the economy comes through increased activity countrywide, and SMEs are very important players in generation of economic activity and that is the reason why banks as service providers are focusing on SMEs

Dhiren Rana

therefore...cost of credit and interest rate are key concerns to consumers, businesses/SMEs...as well as banks

Dhiren Rana

Welcome Mbatia James

Dhiren Rana

Greetings to you!

CHRISTINE VULIMU

Glad to be part of this dicussion

Dhiren Rana

Since the introduction of the total cost of credit initiatives...most recently the APR and KBRR, there has been a huge public interest on how it will positively affect their access to banking services

Dhiren Rana

these initiatives became operational from 1st July 2014...

Dhiren Rana

although it is still early days...within the short period that these initiatives have been in place...we are already seeing strides in so far as transparency around pricing and a response in terms of credit uptake

KIBET LANGAT

On the growth and development of SME's, are there sectors of our economy that you consider "unbankable"? The development gap has been rather slow.

Dhiren Rana

banks are also trying to promote awareness amongst their clients regarding these initiatives

Dhiren Rana

Kibet...morning...

KIBET LANGAT

Good morning sir

Dhiren Rana

...i do not think that there are sectors within SMEs that we consider unbankable

Dhiren Rana

maybe I can ask you Kibet...do you have a specific sector in mind?

CHRISTINE VULIMU

How are the banks regarding this?communicating to the common mwanchi

Zena Rashid

There is a case filed in court.. on the basis that interest rates charged by banks since 2004 are illegal. any thoughts on this?

Dhiren Rana

Thank you Christine for your feedback

Dhiren Rana

Kenya Bankers Association as well as Central Bank of Kenya have already done a media campaign to inform public about initiatives to bring down the cost of credit, specifically the Annual Percentage Rate / APR and the Kenya Banks Reference Rate / KBRR

Dhiren Rana

...some of the avenues of enhancing awareness include today's CEO Chat

KIBET LANGAT

I asked that because there seems to be little penetration especially in my rural area with very little awareness on the products

Dhiren Rana

Individual banks are making attempts to communicate APR to every prospective loan borrower...so that is another communication channel which will help consumers come to an informed decision

Angela Nyabera

Hi Bwana CEO, for many SMEs in Kenya, one of his biggest problems has been securing cash flow for day-to-day operations.The challenge faced by most SMEs is that they have relatively low cash reserves hence are constantly relying on chasing one client or another to be able to manage operations. But even getting an overdraft facility from a bank still requires title deeds, log books or some form of security and that’s really the pain area for start up businesses. Especially those not dealing with actual stocks e.g. software development companies. It would be great if our banks cost of credit favoured such businesses.

ENOCK OGUTU

Apart from the several initiatives spearheaded by the banking industry to enhance credit access, what can you tell those who want to borrow but still can not access credit because of lack of security?

CHRISTINE VULIMU

Thank you Angela.You are speaking for the majority of Kenyans who could contribute a lot if this was addressed.

Dhiren Rana

Zena...thank you for your question...the case in court is in relation to bank charges...as you appreciate, the matter is still in court and is being defended

Dhiren Rana

Kibet...thank you for clarifying...and I am sure banking is penetrating fast even in your area as more financial services providers...including banks and bank agents...provide access to financial services in rural and remote areas

Dhiren Rana

Welcome Angela

Mbatia James

I think the banks are missing a point, its not about how easy people will access to cash but how they gonna use the funds. Im sure all banks offer credit inexchange for collateral. Most people dont have the basics for running businesses, so the end up creating a fragmented industry with a low return of capital in the late entrants, which end up frustrating themselves. Losing property along the way.

Shadrack Musyoka

Congratulations Bwana CEO. The live chat is quite informative to the general public

Dhiren Rana

Angela...to address your point...you make very pertinent observation

Isaac Kiplagat

So, Mr Mbatia, does a bank have a role in creating the awareness to the customer as to when he is ready to acquire a loan/credit?

Conrad Karume

Thank you for the insights Sir. Will the new rates apply to loans taken prior to the introduction of the APR and KBRR rates?

Dhiren Rana

...as you are aware various segments of entrepreneurs are served by sector specialist institutions...

...SACCOs are very important service providers and they too provide significant access to financial services...I believe Kenyas financial services sector is growing rapidly and in coming years will fully meet financial services requirements of all kenyans

Mbatia James

we need a platform that will offer entrepreneur education.

Dhiren Rana

I also want to say that banks have specific products to bridge cash flow needs of SMEs...and collateral requirement is based on the size of exposure as well as cash flow assessment by the bank...this is why startups may typically experience challenges in accessing credit from a commercial bank

Isaac Kiplagat

That is key note

Mbatia James

Because the banks are finding ways to expand their market in the disguise of offering cheap credit.

Dhiren Rana

however...if a startup is eligible under specific structured trade finance they may be in a position to get overdraft or short term loan from a bank

Angela Nyabera

Thanks Dhiren, that's something worth considering / thinking about

Dhiren Rana

Thank you Enock...

KIBET LANGAT

Sir, assessing SME risk has always been difficult in Kenya. This has prompted banks to ask for collateral, charge high interest rates or not lend at all. How do you think this can be addressed?

Dhiren Rana

...collateral is important but when there is a sound business case and clean credit standing of a borrower then banks will be in a position to provide credit such as LPO financing...discounting of cheques...or a small short term overdraft

Simon Lee

the cost of credit calculator clearly shows the high cost of external charges such as legal fees. Are banks looking at or currently provide these services in house at a cheaper rate to reduce the overall cost of credit?

Dhiren Rana

Mbatia James...I do agree that there is no formal training mechanism for first time users of bank credits on prudent use of the money that they borrow

Dhiren Rana

this financial literacy area is one that perhaps we should put more emphasis on as an industry

Isaac Kiplagat

Mr Dhiren Rana, this takes us back to regulatory and policy issues. i personaly don't beieve that competition in banking sector in Kenya is stiff enough to apply pressure on credit issuance.

Dhiren Rana

although there is some degree of education... the credit officers during the credit assessment process do invariably take clients through the implications of borrowing a loan...and also consequences of default in terms of loosing the collateral

Dhiren Rana

Welcome Isaac and Conrad to the discussion...

Isaac Kiplagat

Thank You Rana

Conrad Karume

Thank you Sir

Dhiren Rana

Conrad...APR and KBRR are operational for all new loans and new credits from July 2014..and the same will be operational for all earlier loans and credits over a period of the next 12 months, which is the transition period

BHARAT PATEL

IS THERE A SIMPLE WAY TO LEGALIZE THE RECOVERY OF UNPAID CHEQUES AS IT IS A PART OF COST OF CREDIT IN MY VIEW

Dhiren Rana

Mbatia the issue of awareness and financial literacy is a collective effort and I believe there are some examples and some banks and private training institutions have indeed taken initiatives in this direction

Isaac Kiplagat

Middle East Bank can do that as the next CSR :). Lightnote

Dhiren Rana

Isaac to your point about competition...APR is actually a comparison tool where a consumer is able to compare total cost of credit from different competitors. Therefore, one can approach a number of banks and get the APR quotes and make an informed decision. This is already operational. This will increase the competition across the various loan products that banks offer.

Dhiren Rana

Welcome Bharat Patel

Isaac Kiplagat

Well answered Rana

CHRISTINE VULIMU

Is there a way that the banking institution could make their way into our educational system.to have our your have hands on concerning how to manage funds?

Chat Admin

We welcome all visitors to check out information relating to APR on the KBA website http://www.kba.co.ke

Chat Admin

Correction, the website address is http://www.costofcredit.co.ke

CHRISTINE VULIMU

I meant to say our youth.Is this too small to be addressed by this body?

Dhiren Rana

...Bharat...I am aware that the Credit Reference Bureaus have a database of bounced cheques...this will therefore affect the credit rating of the drawer of bouncing cheques. Also, giving of a cheque that is not good is a criminal offence. Recovery of the amount of course is a court process, which is the legal framework.

Zena Rashid

interesting proposal Christine

Zena Rashid

would reach a wide audience

Dhiren Rana

Christine on the education concerning how to manage personal funds...some initiatives are at concept stage so it will take a little bit of time before schools can benefit

Dhiren Rana

Thank you Simon

Dhiren Rana

...you are bringing a very fresh line of thinking to the discussion

CHRISTINE VULIMU

Thank you Zena.Most young people have stumbled into their parent's debts in the name of family business and morgage.

Dhiren Rana

...the Kenya Bankers Association in partnership with Central Bank and the Treasury are working reforms and strategies that can reduce the costs of external charges.

Dhiren Rana

there are several initatives at the concept stage, including creating a digital movable assets registry

Dhiren Rana

and a securities (collateral) depository, which will allow transfer of securities from one institution to another without having to discharge and charge securities again...this will be more like the transfer of shares at the CDS...and will eliminate high legal costs and also considerably reduce the time for transferring securities

Dhiren Rana

i want to say that Kenya Bankers Association and Kenya Association of Manufacturers have been appealing for the past several years to the Chief Justice concerning need for lowering the tariff under the advocates remuneration act. We are continuing our efforts in that direction.

Dhiren Rana

I wish you acknowledge the presence in this CEO Chat of the KBA Chairman, Mr. Joshua Oigara...who is also the Group CEO of Kenya Commercial Bank

Dhiren Rana

Joshua...thanks for joining us...this is testimony that the whole industry takes the interaction with the banking public very seriously...thank you for your valuable time

Dhiren Rana

Before we wind up...I want to simplify KBRR term

Dhiren Rana

This reference rate is a uniform rate adopted by all banks in Kenya and KBRR / Kenya Banks Reference Rate brings to an end the system of base rate

Dhiren Rana

The fixing of base rate and the choice of time of changing the base rate was earlier discretion of every individual bank...

Chat Admin

Hi all, we experienced a brief connectivity issue a few minutes ago. If you are experiencing any issues please reload the chat page.

Dhiren Rana

...now, Central Bank publishes KBRR, which is an arithmetical average of 91 day treasury bill and the Central Bank Rate / CBR

Joshua Oigara

Thank you Rana.

Chat Admin

Once reloaded click on the "Load old messages" button at the top of the chat dialogue window.

Chat Admin

We apologize for any inconvenience

Dhiren Rana

Banks now quote interest rate in their letters of offer at a given margin above KBRR

Dhiren Rana

Therefore, it makes it very easy for customers to compare the cost of borrowing from different banks, and the customer also is assured that whenever KBRR comes down, simultaneously the cost of borrowing will come down.

Dhiren Rana

This brings in an element of competition and enhanced transparency and these two elements will eventually help reducing interest rates

Peter Ng'ang'a

Bwana MD, following the chat there's good that comes KBRR and the need to grow the lending market. My question is, what is the financial institutions inclusive of the central bank doing in strenghthening the Financial Risk Management systems in Kenya.

Dhiren Rana

Welcome Peter Ng'ang'a

kepha msafari

Demand and Supply determine the cost of goods and services.How is the kenyan banker able to control this in relation to credit?Is KBRR tied to this?

Dhiren Rana

You have a very important question

Peter Ng'ang'a

Thank you Md

Dhiren Rana

...for the last decade or so, a lot of work has been going on to strengthen financial risk management within individual banks; also in the supervision of banks by Central Bank of Kenya.

Dhiren Rana

...various technology based tools are also deployed to identify financial risks and to better manage them

Dhiren Rana

...these include technology surveillance against frauds, and mechanisms such as credit information sharing, etc.

Dhiren Rana

...these help banks avoiding risky propositions and also to guard against frauds.

Dhiren Rana

despite many fold growth of the banking services in the country over the last decade, the stability of banks in Kenya has not been compromised this is the result of new found focus on financial risk management within banks and at Central Bank.

Dhiren Rana

Thank you Kepha

Dhiren Rana

Demand and supply factors ultimately decide the market interest rates...which get factored into KBRR, therefore, KBRR is a representative mechanism of market demand and supply.

Chat Admin

We have run a little over time. Are there any final questions of comments before Mr Dhiran Rana wraps up the chat session with some final thoughts.

Dhiren Rana

As I wrap up, let me share that the KBA, CBK, and the Treasury are working together to enhance credit access and to lower the cost of credit, which includes interest rates and other charges and the high cost of doing business. Among the initiatives are measures to achieve reforms in the Lands and Companies registries; expansion of credit information sharing beyond banks to all credit providers; enhancing consumer protection practices; conceptualizing of alternative dispute resolution mechanisms; and transparency in the pricing which drives effective competition...some of these initiatives are already put in place (e.g. APR, KBRR) and others are on course.

Dhiren Rana

Thank you all so very much for joining this CEO Chat

Joshua Oigara

Thank you and many thanks.

Lucy Matito

Thank you sir for the sinsights

Dhiren Rana

I wish to invite you all to our next CEO Chat, scheduled next Friday at 10am when Mr. Sonola, CEO of GT Bank, will discuss the country risks, pricing of risks and credit information sharing

Conrad Karume

Thank you very much Sir, KBA and the technical team behind this forum.

John Komu

this was a very interesting chat, i look forward to more..

Dhiren Rana

I wish to thank you all for your valuable time. Kenya Bankers Association, as well as your own banks welcome you to exchange any ideas or seek any clarifications on banking related issues.

Chat Admin

Thank you Mr Dhiran Rana for taking the time to be with us this morning and hosting this informative chat session.

Chat Admin

Thank you to all of you for your questions, comments and insights. We look forward to being with you all online at next weeks chat session.

Chat Admin

You will be able to see the full transcript of this chat session and a podcast in the Archives section of the Chat website http://chat.kba.co.ke shortly.

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